Quick Facts

Qatar’s economic freedom score is 70.8, making its economy the 32nd freest in the 2015 Index. Its score has declined by 0.4 point since last year, with improvements in trade freedom and labor freedom outweighed by declines in five of the 10 economic freedoms including freedom from corruption, monetary freedom, and business freedom. Qatar is ranked 3rd out of 15 countries in the Middle East/North Africa region, and its overall score is above the world average.

With vast oil and gas reserves, Qatar enjoys one of the world’s highest standards of living. Efforts to diversify the economy and reduce reliance on the energy sector have been only moderately successful. The oil and gas industries still contribute about half of GDP. Building on open-market policies, the government is trying to position Qatar as a future logistics and financial hub.

Efforts to advance economic freedom have been notable, but momentum has flagged. Respect for the rule of law is tainted by allegations of corruption surrounding a 2022 World Cup bid. The rigid regulatory environment inhibits the growth of small and medium-size enterprises.

Background

The Al-Thani family has ruled Qatar since independence from Great Britain in 1971. Sheikh Tamim bin Hamad Al-Thani, in power since 2013, has focused on domestic issues such as improving infrastructure and providing better health care and educational institutions. Qatar has 25 billion barrels of proven oil reserves and the world’s third-largest natural gas reserves. Oil and gas account for about 85 percent of export revenues and more than 50 percent of GDP. Qatar has permitted extensive foreign investment in its natural gas industry and is the world’s largest exporter of liquefied natural gas. With one of the world’s highest per capita incomes and almost no poverty, Qatar has largely avoided the instability generated by the Arab Spring uprisings, but it has come under fire for its alleged support of radical groups.

Although critics cite a lack of transparency in government procurement, Qatar’s anti-corruption record is among the best in the Middle East. The rule of law is respected. The legal system, however, has been biased against foreign businesses. The judiciary is susceptible to political influence and can be bureaucratic. Foreigners are generally not allowed to own property.

Qatar has no individual income tax. The corporate tax rate is a flat 10 percent (the rate for companies in the oil and gas sector is 35 percent). Other taxes include customs duties. Overall tax revenue amounts to 5.1 percent of domestic output. Government expenditures equal 30.6 percent of domestic production, and public debt equals 34 percent of gross domestic product.

Forming a business takes eight procedures, and the minimum capital required exceeds half the level of average annual income. Obtaining necessary permits remains relatively time-consuming. The non-salary cost of employing a worker is moderate, but the labor market lacks flexibility. Government subsidies are very high: The IMF estimates that pre-tax energy subsidies alone exceed spending on health and education.

Qatar’s average tariff rate is 4.1 percent. Non-tariff barriers are low, but some lines of imports face special import procedures, and others are prohibited. In most cases, foreign investment in a business is capped at 49 percent. The modernized and expanded financial sector is attracting more foreign firms, but the government retains considerable ownership. The capital market continues to grow.